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LISTING PRICES AS SIGNALS OF QUALITY IN MARKETS WITH NEGOTIATION *
Author(s) -
WANG RUQU
Publication year - 2011
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2011.00452.x
Subject(s) - listing (finance) , negotiation , quality (philosophy) , business , microeconomics , economics , industrial organization , finance , law , philosophy , epistemology , political science
We analyze markets where a buyer may pay the listing price or negotiate. We show that listing prices can signal quality to attract the right type of buyers. Prices are lower without quality uncertainty or without some of the lower qualities. In equilibrium, higher qualities/prices induce more bargaining, and thus more expensive goods are sold more often through bargaining.